Question 1

If inventories decline by more than analysts predict they will decline,this implies that

Accepted Answer

A)  actual investment spending was greater than planned investment spending.
B)  actual investment spending was less than planned investment spending.
C)  actual investment spending was equal to than planned investment spending.
D)  there is no relationship between actual investment spending and planned investment spending.E) All of the above
F) None of the above

Question 2

Why do economists care about aggregate expenditures?

Accepted Answer

Increases and decreases in aggregate exp...

Question 3

If planned aggregate expenditure is greater than total production,

Accepted Answer

A)  actual inventories will equal planned inventories.
B)  firms will experience an unplanned decrease in inventories.
C)  GDP will decrease.
D)  the economy is in equilibrium.E) All of the above
F) A) and B)

Question 4

Actual investment spending does not include

Accepted Answer

A)  spending on consumer durable goods.
B)  spending on new capital equipment.
C)  spending on new houses.
D)  changes in inventories.E) B) and C)
F) All of the above

Question 5

From 1983-2013,________ for the United States were negative.

Accepted Answer

A)  planned inventories
B)  net exports
C)  unplanned inventories
D)  transfer paymentsE) B) and C)
F) A) and D)

Question 6

Figure 12-2 
-Refer to Figure 12-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Accepted Answer

A)  The price level in the United States falls relative to the price level in other countries.
B)  Congress abolishes investment tax incentives.
C)  The interest rate rises.
D)  Household wealth declines.E) B) and C)
F) A) and C)

Question 7

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Accepted Answer

Multiplier = <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> . The formula ignores the ...

Question 8

Net exports usually ________ when the U.S.economy is in a recession and ________ when the U.S.economy is expanding.

Accepted Answer

A)  increase; increase
B)  decrease; increase
C)  increase; decrease
D)  decrease; decreaseE) All of the above
F) A) and C)

Question 9

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

Accepted Answer

A)  investment spending.
B)  export spending.
C)  government spending.
D)  the level of aggregate expenditure.E) A) and B)
F) All of the above

Question 10

At macroeconomic equilibrium,total ________ equals total ________.

Accepted Answer

A)  spending; production
B)  investment; inventories
C)  consumption; production
D)  taxes; transfersE) B) and D)
F) None of the above

Question 11

The consumption function describes the relationship between

Accepted Answer

A)  consumption spending and national income.
B)  consumption spending and aggregate income.
C)  consumption spending and disposable income.
D)  consumption spending and personal income.E) A) and D)
F) B) and C)

Question 12

The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.

Accepted Answer

A)  supply and demand
B)  national income
C)  aggregate expenditure
D)  business cycleE) All of the above
F) B) and C)

Question 13

An increase in taxes will ________ consumption spending,and a decrease in transfer payments will ________ consumption spending.

Accepted Answer

A)  increase; increase
B)  decrease; increase
C)  increase; decrease
D)  decrease; decreaseE) A) and C)
F) None of the above

Question 14

If disposable income falls by $50 billion and consumption falls by $40 billion,then the slope of the consumption function is

Accepted Answer

A)  1.20.
B)  0.80.
C)  0.70.
D)  0.10.E) None of the above
F) A) and C)

Question 15

________ spending follows a smooth trend whereas,________ spending is more volatile and subject to fluctuations.

Accepted Answer

A)  Consumer; government
B)  Consumer; investment
C)  Investment; consumer
D)  Government; consumerE) A) and B)
F) B) and C)

Question 16

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

Accepted Answer

A)  Aggregate expenditure will shift downward.
B)  Aggregate expenditure will become steeper.
C)  Aggregate expenditure will shift upward.
D)  Aggregate expenditure will not be affected by an increase in the price level in the United States.E) A) and D)
F) A) and C)

Question 17

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Accepted Answer

A) True 
 B)False

Question 18

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 1,000 + 0.8Y
I = 1,500
G=1,250
NX = 100

Accepted Answer

A)  0.2
B)  0.8
C)  1.8
D)  10E) A) and C)
F) A) and D)

Question 19

Actual investment spending includes spending by consumers on

Accepted Answer

A)  durable goods.
B)  nondurable goods.
C)  new houses.
D)  services.E) B) and C)
F) None of the above

Question 20

If national income increases by $20 million and consumption increases by $5 million,the marginal propensity to consume is

Accepted Answer

A)  4.
B)  0.75.
C)  0.5.
D)  0.25.E) All of the above
F) B) and C)

Exam 12: Aggregate Expenditure and Output in the Short Run

An increase in taxes will ________ consumption spending,and a decrease in transfer payments will ________ consumption spending.

Correct AnswerverifiedShow Answer

Why do economists care about aggregate expenditures?

Correct AnswerverifiedIncreases and decreases in aggregate exp...View AnswerShow Answer

What is the formula for the multiplier? Explain why this formula is considered to be too simple.

Correct AnswerverifiedMultiplier = . The formula ignores the ...View AnswerShow Answer

From 1983-2013,________ for the United States were negative.

Correct AnswerverifiedShow Answer

Actual investment spending does not include

Correct AnswerverifiedShow Answer

When Jack's income increases by $1,000,he spends an additional $850 dollars.This implies that his marginal propensity to consume is 0.85.

Correct AnswerverifiedShow Answer

The key idea of the aggregate expenditure model is that in any particular year,the level of GDP is determined mainly by

Correct AnswerverifiedShow Answer

If national income increases by $20 million and consumption increases by $5 million,the marginal propensity to consume is

Correct AnswerverifiedShow Answer

If planned aggregate expenditure is greater than total production,

Correct AnswerverifiedShow Answer

If disposable income falls by $50 billion and consumption falls by $40 billion,then the slope of the consumption function is

Correct AnswerverifiedShow Answer

________ spending follows a smooth trend whereas,________ spending is more volatile and subject to fluctuations.

Correct AnswerverifiedShow Answer

Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 1,000 + 0.8Y I = 1,500 G=1,250 NX = 100

Correct AnswerverifiedShow Answer

Actual investment spending includes spending by consumers on

Correct AnswerverifiedShow Answer

At macroeconomic equilibrium,total ________ equals total ________.

Correct AnswerverifiedShow Answer

The ________ model focuses on the relationship between total spending and real GDP in the short run,assuming the price level is constant.

Correct AnswerverifiedShow Answer

The consumption function describes the relationship between

Correct AnswerverifiedShow Answer

An increase in the price level in the United States will have what effect on the aggregate expenditure line?

Correct AnswerverifiedShow Answer

Net exports usually ________ when the U.S.economy is in a recession and ________ when the U.S.economy is expanding.

Correct AnswerverifiedShow Answer

If inventories decline by more than analysts predict they will decline,this implies that

Correct AnswerverifiedShow Answer

Figure 12-2 -Refer to Figure 12-2.If the U.S.economy is currently at point K,which of the following could cause it to move to point N?

Correct AnswerverifiedShow Answer

An increase in taxes will consumption spending,and a decrease in transfer payments will consumption spending.

Correct Answer
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Increases and decreases in aggregate exp...
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Multiplier = . The formula ignores the ...
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spending follows a smooth trend whereas, spending is more volatile and subject to fluctuations.

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At macroeconomic equilibrium,total equals total .

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Net exports usually when the U.S.economy is in a recession and when the U.S.economy is expanding.

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